Sep 24 2019 68614 1

Dated: 09/24/2019

Views: 56

You’ve most likely heard the rule: Save for a 20-percent down payment before you buy a home. The logic behind saving 20 percent is solid, as it shows that you have the financial discipline and stability to save for a long-term goal. It also helps you get favorable rates from lenders.

But there can actually be financial benefits to putting down a small down payment—as low as three percent—rather than parting with so much cash up front, even if you have the money available.

THE DOWNSIDE

The downsides of a small down payment are pretty well known. You’ll have to pay Private Mortgage Insurance for years, and the lower your down payment, the more you’ll pay. You’ll also be offered a lesser loan amount than borrowers who have a 20-percent down payment, which will eliminate some homes from your search.

THE UPSIDE

The national average for home appreciation is about five percent. The appreciation is independent from your home payment, so whether you put down 20 percent or three percent, the increase in equity is the same. If you’re looking at your home as an investment, putting down a smaller amount can lead to a higher return on investment, while also leaving more of your savings free for home repairs, upgrades, or other investment opportunities.

THE HAPPY MEDIUM

Of course, your home payment options aren’t binary. Most borrowers can find some common ground between the security of a traditional 20 percent and an investment-focused, small down payment. Your trusted real estate professional can provide some answers as you explore your financing options.

Blog author image

Julia Doria

Julia Doria, a Colorado native, is an expert in Denver properties. Having lived in Denver for 34 years, she knows the neighborhoods of Denver and the surrounding communities inside and out. Julia....

Latest Blog Posts

5 NEGOTIATING TACTICS THAT KILL A SALE

Negotiation is a subtle art in real estate, but skilled negotiators can usually find some common ground that satisfies all parties. On the other hand, using the wrong negotiation tactics can sink a

Read More

Holidays Lights

Slide 1Slide 1The idea to design holiday lights professionally came to Kelly Fitzsimmons like, well, a light bulb switching on. The Chicago-area pro launched Light Up Your Holidays nearly

Read More

A Christmas Story From Denver Colorado

Christmas Eve 1914, Denver ColoradoA young family gathers around the fireplace to celebrate and share in gift giving. Everyone tries real hard but sadly there’s a blue tone in everyone’s smile

Read More

9 Wonderfully Simple Ways To Make Your House Smell Like The Holidays

1. Use fresh greeneryWreaths, garlands, and arrangements filled with winter foliage go hand in hand with any holiday decor. Johnson suggests using real greenery in your floral displays or

Read More